Schenectady County Community College will help test loan program

PHOTOGRAPHER: Michael Lamendola

Schenectady County Community College will participate this year in a pilot program aimed at reducing default rates on student loans, one of the fastest growing types of debt in the nation.

Called Smart Track, the program will engage students from when they first set foot on campus to after they graduate and help them understand their indebtedness and how to keep from defaulting, said Brian McGarvey, director of financial aid at SCCC and a member of the State University of New York Default Reduction Task Force.

“SUNY wants to bring down the default rate significantly,” he said. “If we can significantly reduce default rates, would not that be a major achievement?”

SUNY calls the program, unveiled Wednesday, a model for the nation in terms of providing transparency about college costs and financial aid and the amount of federal loan debt accumulated by today’s college students.

As part of the pilot program, various SCCC departments will help students complete their degrees and obtain a job after graduation, enabling them to pay off their loans.

Smart Track will also engage SUNY’s Student Loan Service Center to contact graduates about their Federal Direct Loans. low-interest loans to students and their families used to help pay the cost of higher education. The center currently assists in the collection of Perkins Loans, low-interest federal loans for undergraduate and graduate students with exceptional financial need.

McGarvey said the center will make students aware of their repayment obligations and assist them should they default.

“We are not contacting them as a collection agency. There will be no collecting involved,” he said.

Dan Tramuta, associate vice president for enrollment services at SUNY Fredonia, another participant in the pilot program, called Smart Track an “early warning system” for students at risk of defaulting.

“It is a structured model that follows students through their education. We will provide them information about the cost of college, about student loans, about borrowing what they need in relation to their job prospects, their repayment options,” said Tramuta, president of the New York State Financial Aid Administrators Association.

McGarvey said Smart Track could prove significant in reducing default rates.

“The reality is that most of those students should never default,” he said. “There are many options out there if the students are aware of them, and we make an effort to contact them and walk them through it.”

The first students to be contacted will be those who graduated in May 2011.

McGarvey said SCCC’s student loan default rate is 11 percent, which translates into 86 students defaulting out of 773 who graduated in 2009, the most recent data available.

The two-year college default rate nationally is 11.9 percent, while the default rate among students of New York’s community colleges is 12.7 percent. At SUNY four-year colleges and universities, the default rate is 4.8 percent, compared with 5.2 percent at four-year colleges nationwide.

That rate is among students who defaulted within two years of graduating. The federal government, which tracks the data, plans to increase the measurement to three years, which officials said would provide a more accurate reading of the true rate.

“We think it is still too high, and we want to do something about it,” McGarvey said.

By lowering the default rate, he said, the federal government saves money, SUNY satisfies a major initiative and students benefit.

McGarvey said the outreach service will have many tools at its disposal in helping track down students on the verge of defaulting.

“When students leave school and complete the exit counseling, we have their name, address, home phone number, cellphone number and the names and addresses of people they put on application as contacts,” he said.

He said SUNY hopes to put the program in place throughout all of its schools once the pilot period ends.

“They want to find out what works and what does not work,” McGarvey said. “There are cost factors. If the program works as well as they expect it to work, the [SUNY] chancellor [Nancy Zimpher] wants to make it required for 2013. If there are costs involved, the colleges need to budget for those costs.”

SCCC is one of six SUNY colleges in the pilot program. The others are community colleges in Niagara and Ulster counties, SUNY colleges at Fredonia and Purchase and the University at Albany.

“They tried to pick geographically diverse schools from throughout the state,” said McGarvey, who volunteered SCCC when he heard the program was being tested.

According to a report released Friday by the Federal Reserve Bank of New York, student loan debt is the only form of consumer debt that has grown since the peak of the debt crisis in 2008. Student loan balances have eclipsed both auto loans and credit cards, making student loan debt the largest form of consumer debt outside of mortgages.

The report said total student loan debt stood at $902 billion in the first quarter of 2012, up from $360 billion in 2005, and the average student loan balance was $24,000, up from $15,000 in 2005.

The federal report said delinquency rates for student loans are likely understated, as almost half of the loans are in deferment or in grace periods and not showing up on records.